While the rate of price increases for prescription drugs may have slowed in 2017, it was still slightly more than the overall rate of inflation. The Centers for Medicare and Medicaid Services (CMS) reports that, on average, the annual increase of prescription medications was about 2.1%, which is actually good news for consumers as it was just slightly higher than the overall consumer rate of inflation (CPI).
This is actually great news for families, whether they are low or higher income families. You may ask why is that good news if the total cost is still higher than the total rate of inflation? Well the reason why is that the 2.1% increase in 2017 is one of the lowest growth rates in a number of years. Therefore the growth rate in the cost of medications has come down. While good news, we are still shocked by stats from IMS Institute for Healthcare Informatics and others on how many people take medications as an escape vs. addressing the root cause of their medical issue, and the drugs are completely unnecessary.
Back in the early 2000s the annual increases for prescription drugs were 10%, and even more recently in the early to mid-2010s the rate of increases was still mid to high single digits per CMS. Therefore, the rate of increases in 2017 was on the low end.
Reason for lower prescription increases in 2017
While of course no one can say for sure, and there are many theories, one of the biggest is that there was tremendous focus by politicians, the news media, and others on how costly prescription medications were becoming. Whether you like him or not, some experts say President Trump also played a big part in bringing attention to this issue in that he continually talked about how pharmaceutical companies were in effect price gauging American households. He has spoken extensively about placing pressure on the drug companies to make medications more affordable.
Some drug companies also mad major mistakes in how they priced their medications. Therefore pharmaceutical companies were self-destructive in their own pricing schemes. Examples of this includes Mylan and their EpiPen, which is a critical medication for anyone having an allergic reaction. This company increased their price for this life saving medication by hundreds of percent over the years, and in 2017 all of that came crashing down. They were charging over $600 for the dosage, and this brought horrible PR to the pharmaceutical industry. Another example was the cost increase of Daraprim, who increased the cost of one table of the generic drug from $13.50 to $750! The self-destructive destructive pricing actions from the industry caused many of their own problems as the increases were not sustainable, brought terrible attention to themselves, and those drug companies felt the impacts in 2017.
This increased scrutiny may have played in big role in many of the pharmaceutical companies pledging to keep future cost increases at a more manageable level. Companies such as Elli Lilly, Johnson and Johnson, and others pledged to keep their annual increases under 10%. The pressure put on these manufactures throughout 2017 may have caused them to be more mindful of what they were charging consumers.
The Food and Drug Administration also may have played a role in keeping prices in check. The Republican Administration has been working to streamline the generic approval process, and some more generic prescription drugs were approved by the FDA in 2017. This lead to more competition, which almost always tends to bring down prices.
While it is good news the average increases for 2017 were close to 2%, the Centers for Medicare and Medicaid Services does not expect that trend to continue. They expect the average cost of medications to soon start to accelerate again to the mid-single digit range in 2018 and future years. But we hope some of what led to lower price increases in 2017 (whether it was the press, politicians, or whatever) continues.
We recommend people find assistance for their prescription drugs, and do not just take medications to cover up the underlying cause of what the issue is. We are also astounded by how many Americans now take a medication on a daily basis, a large number of people do this as “an escape” from addressing the root cause of their problems is always shocking to us. The stats from CMS and other organizations support that as well. We have becoming a nation of pill poppers, and have sadly have a love affair with prescription drugs.